ISMA Seeks Fair Ethanol Allocation Mechanism
ISMA has urged the government to revise ethanol procurement prices and increase supply allocations, citing rising cost pressures. While sugarcane prices rose 16.5% since 2022–23, ethanol rates for cane-based feedstocks have remained unchanged, threatening the financial viability of sugar mills and ethanol producers.
The Indian Sugar and BioEnergy Manufacturing Association (ISMA) has urged the government to revise ethanol procurement prices and allow higher supply allocations to support the financial viability of the sugar and ethanol industry. According to the association, these measures are essential to sustain ethanol production from sugarcane-based feedstocks and to maintain balance in the sugar–ethanol ecosystem.
Rising Cane Prices, Stagnant Ethanol Rates
ISMA highlighted a growing mismatch between input costs and ethanol procurement prices. While the Fair and Remunerative Price (FRP) of sugarcane increased by 16.5%—from ₹305 per quintal in the 2022–23 sugar season to ₹355 per quintal in 2025–26—ethanol procurement prices for sugarcane-based feedstocks such as sugarcane juice (SCJ) and B-heavy molasses (BHM) have remained unchanged since 2022–23. As a result, mills face increasing cost pressures without corresponding revenue support.
Ethanol Cost–Price Disparity Widens
The stagnation has led to a significant cost–price gap in ethanol production. ISMA stated that the current cost of producing ethanol from B-heavy molasses is around ₹66.09 per litre, while the procurement price stands at ₹60.73 per litre—creating a shortfall of nearly ₹5 per litre.
Similarly, ethanol produced from sugarcane juice also faces a cost–price gap of approximately ₹5 per litre. When calculated using the government-determined pricing formula, the gap widens further to about ₹10 per litre for BHM and ₹11 per litre for SCJ.
Deepak Ballani, Director General of ISMA, warned that the widening cost–price gap makes ethanol production from sugarcane-based feedstocks financially unviable. He added that this situation strains mill liquidity and delays payments to farmers.
Risk of Reduced Sugar Diversion to Ethanol
Ballani cautioned that without a revision in ethanol procurement prices, sugar mills will be discouraged from diverting excess sugar towards ethanol production. “This will worsen the domestic sugar surplus and increase inventory levels, further tightening cash flows for mills,” he said. ISMA emphasised that timely price revisions are critical to sustaining the Ethanol Blended Petrol (EBP) programme, stabilising domestic sugar prices, and preserving a balanced sugar–ethanol equation.
Ethanol Allocation: Need for Feedstock Balance
Beyond pricing concerns, ISMA flagged lower ethanol supply allocation as another major challenge facing sugar mills. NITI Aayog’s Biofuel Roadmap (2021) had projected that the sugar sector would contribute about 55%—or 550 crore litres—of the total 1,016 crore litres of ethanol required to achieve 20% blending (E20) by 2025–26. Encouraged by this vision and supported by government interest subvention schemes, the sugar industry has invested more than ₹40,000 crore to build ethanol production capacity exceeding 900 crore litres.
Sharp Cut in Sugar-Based Ethanol Allocation
At 90% capacity utilisation and after meeting industrial demand of around 160 crore litres, the sugar sector is capable of supplying nearly 650 crore litres of ethanol for fuel blending—equivalent to diverting about 60 lakh metric tonnes (LMT) of sugar.
However, under the Ethanol Supply Year (ESY) 2025–26, the sugar sector’s allocation has been reduced to 289 crore litres, representing only a 28% share. This translates to sugar diversion of just around 34 LMT, while grain-based ethanol has been allocated nearly 72% of the total supply. ISMA warned that this imbalance could push distillery utilisation below 50%, leaving significant capacity idle and threatening economic viability, loan repayments, and operational stability.
Impact on Mills, Farmers, and Sustainability
“With lower ethanol offtake, surplus sugar stocks will rise, prices will come under pressure, and mills will face financial stress,” Ballani said. He added that declining ethanol revenues would lead to liquidity crunches, affecting mills’ ability to repay loans and make timely payments to farmers, potentially resulting in farmer distress.
Moreover, ISMA cautioned that excessive dependence on food grains—especially maize—could impact feed availability, alter cropping patterns, and increase carbon intensity. In contrast, sugarcane-based ethanol offers better emission reductions and stronger rural sustainability benefits.
ISMA’s Recommendations to the Government
To restore balance, ISMA has recommended that the government rebalance ethanol allocations by reserving at least 50% of total ethanol supply for sugarcane-based feedstocks, in line with NITI Aayog’s EBP roadmap.
As reported by chinimandi.com, additionally, the association has urged fair allocation in the Cycle 2 tender by assigning at least 150 crore litres of ethanol from sugarcane juice and B-heavy molasses. According to ISMA, these measures are essential to maintain supply balance, protect industry investments, and ensure long-term sectoral stability.
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Source : Chemindigest
